1. Health Insurance Premium Tax Credit and Cost-Sharing Reductions.
- Author
-
Fernandez, Bernadette
- Subjects
HEALTH insurance premiums ,TAX credits ,PATIENT Protection & Affordable Care Act ,HEALTH insurance policies ,HEALTH care reform - Abstract
Certain individuals without access to subsidized health insurance coverage may be eligible for the premium tax credit (PTC) established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) and amended under the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) and the enacted budget reconciliation measure (P.L. 117-169) (commonly referred to as the Inflation Reduction Act) to include several temporary provisions. The dollar amount of the PTC varies from individual to individual, based on a formula specified in statute. Individuals who are eligible for the PTC may be required to contribute some amount toward the purchase of health insurance. To be eligible to receive the premium tax credit in 2023, individuals must have annual household income at or above 100% of the federal poverty level; not be eligible for certain types of health insurance coverage, with exceptions; file federal income tax returns; and enroll in a plan through an individual exchange. Exchanges (or marketplaces) are not insurance companies; rather, exchanges serve as marketplaces for the purchase of health insurance. The PTC is refundable, so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income tax liability. The credit also is advanceable, so individuals may choose to receive advanced payments of the credit (or APTC). APTCs are provided on a monthly basis to coincide with the payment of insurance premiums, automatically reducing consumer costs associated with purchasing insurance. The credit is financed through permanent appropriations authorized under the federal tax code. Individuals who receive premium credit payments also may be eligible for subsidies that reduce cost-sharing expenses. The ACA established two types of cost-sharing reductions (CSRs). One type of subsidy reduces annual cost-sharing limits; the other directly reduces cost-sharing requirements (e.g., lowers a deductible). Individuals who are eligible for CSRs may receive both types. The ARPA made temporary changes to the PTC and to CSRs. Of those temporary changes, one provision expanded eligibility for the PTC and increased the amount for tax years 2021 and 2022. The ARPA temporary changes to the PTC and CSRs that have expired include the provisions that • suspended the requirement, for tax year 2020, that individuals pay back PTC amounts that were provided in excess and • expanded eligibility for and the calculation of both the PTC and the CSRs for individuals who receive unemployment compensation during calendar year 2021. The budget reconciliation measure, enacted on August 16, 2022, extends the ARPA provision that expanded eligibility for and the amount of the PTC for three years to sunset at the end of tax year 2025. The Internal Revenue Service promulgated a rule on October 13, 2022 to address family eligibility for the PTC, which would expand the number of individuals who would become eligible. This report describes current law and applicable regulations and guidance, specifically with regard to how the PTC and CSR requirements apply in 2023. [ABSTRACT FROM AUTHOR]
- Published
- 2023